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A Look At the External Factors that Affect Real Estate Markets

The real estate market does not happen in a vacuum. It is affected by different external factors that are outside any one person’s control. As people in the real estate market know, we cannot control it nor can we predict it with 100% certainty. Yet, experience and expertise account for a lot in this industry. It is also difficult to make broad generalizations about the market when communities have their own idiosyncrasies, politics, and changes to contend with. For example, our Texan neighbors in Houston have seen quite an unpredictable market after Hurricane Harvey. We thought we’d take a look at some of these external factors and how they might apply to your quest to buying or selling your home.

The Economy

While every downturn in the market is immediately attributed to the state of the economy, this is true to an extent. The only difference is that the economy is not just one thing; there are varying factors that can have an impact. The national economy, the state economy, and the local economy are interrelated but can differ slightly from place to place. The economy is also affected by political climate and consumer confidence and the effect of these things are often hard to measure with precision. The latest numbers from the Trump administration showed some pretty positive employment rates. According to reports, August saw 201,000 jobs added plus high economic recovery across the board; it is numbers like this that can help people make a prediction about the state of the upcoming real estate trends.

Nature

Houston is an interesting case. Harvey damaged 166,451 homes in four days. It took about 96 hours to completely shift the real estate market that had been previously thriving. Brimming neighborhoods turned to ghost towns, homeowners switched to renting and displaced folks scrambled to find a quick solution to their differing situations. The large impact of the storm created some interesting effects.

Nature can have devastating effects in a real estate market and hit without much warning. In 2017 and the immediate aftermath of the storm, the market was in odd shape. Aside from destroyed properties and disappeared walls, listings went up, but sales prices were down. A year later, the fear has somewhat subsided and things in the market are returning to some normality. The returning interest has pushed house prices higher restoring the market and tipping it back to a seller’s market. In Harris County, although home price growth was double digits before the hurricane has only risen 2 percent, but according to a report that compared people wanting to move out vs people wanting to stay or move in, the latter won out.

At the same time, the effect of the storm has created new housing trends. People in certain Houston neighborhoods have taken to building their homes ten feet above the ground. House flipping also became a big money maker for savvy investors. Many flocked to the damaged properties and bought out damaged houses for a fraction of their pre-Harvey value, have worked to fix them up, flip them, and rent them out.

Interest Rates

Things like the state of the global economy, banks, and politics can also influence interest rates. What happens abroad can very much affect the way the housing markets shift in the United States. Yet, interest rates are not completely unregulated, the Federal Reserve has a lot to say about the changes in these rates. Sometimes, however, the artificial control of these interest rates can lead to trouble, as it did in the 2008 housing bubble.

Changing Demographics

Every generation has its own characteristics. As we’ve discussed before on our blog, the Millenial generation has often been credited with preferring renting instead of buying. Latest data, however, showed that Millennials are actually buying more houses today, they may have just waited a little longer. Also, changing patterns in the population including age, gender, and cultural preferences can play a role in how real estate experts approach the markets. Understanding the current cultural trends can be a good indicator as to what group is looking for what.

Choose Your Guide Correctly

If you’re looking to jump into the real estate market—whether it is through selling or buying a home— all of these factors can seem pretty daunting. Having someone that understands these ebbs and flows and has a close finger to the pulse of the market is the best way to ensure you get the best deal possible. Brian Burds Real Estate Team studies many of these factors and how they relate to the El Paso community. We want to see homebuyers and sellers succeed and share the knowledge through our experience.